President Trump’s second term has been marked by a sharp contrast in the stock market’s performance compared to his first presidency. The S&P 500 index has fallen into correction territory, with other major indexes like the Nasdaq and Russell 2000 following suit. Trump once touted the booming stock market as a proxy for his political success.
However, investors are now shaken by the administration’s inconsistent messaging on tariffs and the uncertainty surrounding Trump’s policies. There are concerns that consumers may hesitate to spend and businesses may be reluctant to invest, potentially driving the economy into a downturn. The Trump administration has acknowledged that its economic policies could result in short-term pain while emphasizing the goal of long-term job growth.
Trump recently suggested that the stock market might no longer be the barometer for success it once was, stating, “Markets are going to go up, and they’re going to go down. But you know what? We have to rebuild our country.”
Despite the rocky start, some bullish strategists remain optimistic about a market rebound.
They point to robust earnings growth and a solid economic backdrop as key catalysts still in place.
Trump’s economic policy uncertainty
Brian Belski of BMO Capital Markets urged investors to rely on facts over feelings, while John Stoltzfus of Oppenheimer suggested that recent market turbulence is a result of short-term traders attempting to shake out nervous investors.
However, others are more cautious. Jeff Blazek of Neuberger Berman expects the dominant “Magnificent Seven” stocks to lag, potentially prolonging the market reset. Smaller stocks may pick up the slack once Trump shifts his focus to deregulation, potentially sparking more mergers and acquisitions.
Investors are also looking to international stocks and US firms with a global tilt as potential opportunities. European banks are seen as undervalued and poised for a rise by Tim Murray of T. Rowe Price.
Until US markets stabilize, some strategists are taking a cautious approach by targeting companies with significant dividend growth. While investors may not have anticipated the current market challenges in Trump’s second term, many strategists remain hopeful for a rebound. As Jamner from ClearBridge Investments commented, “It’s less market-friendly so far, but I think we’re still headed in that direction.”
